Photo Credit : ANI,
Reserve Bank of India (RBI) has mandated that all lenders must now give borrowers a Key Fact Statement (KFS) when they take a loan. The statement should explain all the important terms of the loan agreement, including the overall annual percentage rate (APR). This applies to both retail and MSME loans. APR is the interest charged for borrowing and indicates the annual cost of the loan.
RBI Governor Shaktikanta Das announced the directive during the bi-monthly meeting of the central bank's Monetary Policy Committee (MPC), expands the current mandate of KFS, which was previously applicable only to loans from commercial banks to individual borrowers, digital lending by RBI-regulated entities and microfinance loans.
The decision was made to enhance transparency in disclosure practices among RBI-regulated entities in terms of loan pricing and associated charges. The measures aim to simplify and clarify crucial information about loan agreements for borrowers.
The KFS is designed to present key details in an easily understandable format, empowering borrowers to make well-informed decisions. The move is expected to benefit both retail and MSME loan applicants by providing comprehensive insights into the terms and costs associated with their loans.